Medical Bills in a Personal Injury Case: “Paid or Incurred”

Paid or Incurred Medical ExpensesCollecting medical bills in a personal injury case in Texas has become more complicated.  In the “old days” you could just add up your bills from the hospital and doctors and that’s what you were entitled to collect.  It is not that simple anymore.  Therefore, many Dallas personal injury attorneys have become very careful on how they handle their client’s medical expenses.

The “Old Days.”

Up until 2003, recovery of medical expenses in a personal injury case was very simple.  The Plaintiff was permitted to claim all reasonable charges for necessary treatment of the injuries.  This was true even if the Plaintiff used their health insurance.  For example, let’s say someone  is injured in an accident and goes to the hospital.  If the hospital charged $5,000 for the visit, the Plaintiff was allowed to recover $5,000 in their claim.  This was true even if health insurance paid the bill and the injured party only had a relatively small co-pay.

Total Hospital Charges:    $5,000.00

Health Insurance Adjustment:   – $3,000.00

Health Insurance Payment:     $1,500.00

Patient Responsibility:    $500.00

Amount that may be claimed:   $5,000.00

In this example, the Plaintiff is entitled to claim the whole $5,000 bill event though most of it was written off and/or paid by health insurance.  This was true because of the “collateral source” rule.  This rule provides that a person who negligently caused injury to another should not benefit by the injured party’s own health insurance.  Therefore, a negligent Defendant was responsible for the charges of the injured person’s medical treatment regardless of whether or not the Plaintiff used health insurance.

But, in 2003, this all changed….

Texas Civil Practice & Remedies Code, Section 41.0105.

In 2003, the Texas Legislature passed Section 41.0105 of the Texas Civil Practice and Remedies Code which provides:

Sec. 41.0105. EVIDENCE RELATING TO AMOUNT OF ECONOMIC DAMAGES. In addition to any other limitation under law, recovery of medical or health care expenses incurred is limited to the amount actually paid or incurred by or on behalf of the claimant.

Essentially, the old way of collecting medical expenses was over.  Now, an injured Plaintiff was not allowed to collect the total charges.  Rather, only the amounts that have been paid or are owed is collectible.  The adjusted amount is not collectible in the claim.

So, in our example above, the injured party would only be entitled to claim only $2,000.00, as medical expenses:

Total Hospital Charges:    $5,000.00

Health Insurance Adjustment:   -$3,000.00 (Not Collectible)

Health Insurance Payment:     $1,500.00 (Paid)

Patient Responsibility:    $500.00 (Incurred or Owed)

Amount that may be claimed:   $2,000.00

Only the amounts that have actually been paid by or on behalf of the injured party, as well as the amount that is owed, is collectible.  The amount that is adjusted off is not recoverable.

The Effect of the Section 41.0105.

On the surface, one might think that the new rule is good.  And it may well be.  It lowers the amount paid for personal injury claims and might have the effect of keeping insurance rates down.

But the reality is that it partially abrogates the “collateral source” rule.  So now, the negligent party gets the benefit of health insurance that the injured party paid for.  Some may think that this is inherently unfair.

No matter what, this is now the new rule and will probably be for a very long time.

 What does an injured party do?

How the injured party chooses to handle this situation is something that should be discussed with their personal injury attorney.  Some attorneys might have the health insurance pay the hospital bill.  Even though this might effect the amount of the client’s recovery, it can also avoid a hefty hospital lien which can do much more damage to your case.  Other attorneys may say not to use health insurance at all and make special arrangements with the doctors under an LOP (“Letter of Protection”).  This might be the case especially where the hospital bill is relatively small compared to the rest of the Plaintiff’s medical treatment.  Either way, an injured party would certainly benefit by retaining an experienced personal injury attorney very early in the game before things spiral out of control.

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